Mobile money has had bad press lately for fraud-related cases. Most of the reported cases were either the result of internal employees misusing the system to cause operator losses or fraudsters trying to scam unsuspecting users. There is another angle that rarely gets any press—when users or agents abuse the platform and use it in rogue ways that it was never intended.
Across East Africa, most mobile money transactions are primarily between registered users. Registered users get free cash-in (convert cash into mobile money, steps 1), pay fees to make transfers to other registered users (step 2) and registered recipients pay fees to cash-out (convert mobile money into cash, step 3). Most transactions are single loop (from sender to receiver and then converted into cash) and the operator automatically deducts and shares fees with agents as summarized in the standard scenario.
Agents are critical for success of any mobile money platform, but they may also offer its weakest link. Let us consider a few examples. Agents may charge additional fees to customers, they may bypass the platform for withdrawals, they may perform over the counter transfers for customers to other agents if they have ability for P2P amongst agents or they may split transactions to take advantage of the pricing model. I am sure others can easily add to this list.
Direct deposits: Customers can abuse the mobile money platform by making direct deposits or remote cash-ins as some refer to them. In this case instead of the usual loop (cash-in > transfer > cash-out), a user provides the recipient number at the agent, enabling them to cash-in directly into the recipient’s wallet and avoiding paying a transfer fee (skip step 2 and have agent perform step 3).As you notice in the summary table, the operator’s income drops while the agent is unaffected because they still share revenue with the operator. Altering the transaction cash-in transaction flow to require a customer PIN, similar to the cash-out flow can help, but does not necessarily make it impossible to perform direct deposits.
Double dipping using Cash: Agent asks customer to pay cash-out fee (for step 3) then performs normal platform cash-out process. Here the customer is made to pay the cash-out fee twice, first by the system and second by the rogue agent. While this improves rogue agents’ commissions, it does not affect the operator’s income. This can be addressed by creating better customer awareness on how fees are charged.
Double dipping using Fees: Agent asks customer to transfer mobile money plus a cash-out fee to agent mobile, agent then offers cash in return bypassing normal platform cash-out process. Here the customer pays transfer fee twice, first to move mobile money to recipient and second to move mobile money to agent. This results in higher customer fees and increases commissions for rogue agents. The operator may gain on lower transaction tiers from the double transfer fee, but lose out on the higher tier transactions because they tend to offer bigger commissions (as proportion of transferred amount) to agents. This can also be addressed by creating better customer awareness.
Such rogue use of the mobile money platform can harm operator revenue, customer trust and the overall health of the mobile money ecosystem in the long run.
All of this points to a fundamental shortcoming—mobile money platforms have been conceived as simple channels to transfer e-value between mobile phone users. As we start to create sophisticated financial products on top of mobile money because of its inherent potential to serve the majority that are currently unbanked, we do need to revisit the foundations to ensure that mobile money platforms provide the same level of security and fiduciary controls that banked customers now take for granted.
As a mobile money provider, how are you protecting your revenue and reputation?